Posts Tagged ‘Chief Oil and Gas’

Harry Traver and Doug Brody glanced at each other, stood up and followed their neighbor’s lead.

“We didn’t drive all the way out here to make changes,” neighbor Joel Field responded when Carrizo Oil & Gas proposed amendments to the multimillion-dollar deal the three came to finalize.

Before the men made it very far, the company reeled them back to the bargaining table at its Pittsburgh office and hammered out a natural gas deal that includes the mineral rights to roughly 8,500 acres.

Willing to walk away from a deal worth more than $4 million – with the potential to become much more than $40 million – the three men exemplify the roughly 135 families they represent.

“Ninety-five percent of the people that signed live here,” Mr. Brody said. “I mean, this is our home … It’s been our group’s home for years and generations in some cases. We took our time and I think we did it right.”

Noxen is a community that came together and protested the closing of its post office on a bitter December morning. They embrace the camaraderie of a community that answered the call when its historic train station was threatened with demolition and raised money to protect it.

So, when gas company land agents approached residents in rural Noxen Twp., they demonstrated perhaps their greatest skill: their ability to unite.

Strength in numbers

Residents gathered under the pavilion behind Noxen United Methodist Church to formulate their plan of action. Across the street from his Whistle Pig Pumpkin Patch, Mr. Field found himself responsible for preserving the hopes of his family, friends and neighbors for a lucrative gas lease. The Noxen Area Gas Group was born.

“I kind of stood up and said, ‘Well, we ought to try this and we ought to try that,’ and everybody said, ‘OK. Great. Go do that,’” the 47-year-old farmer said.

“The responsibility was awesome.”

Over a 2½-year span, those responsibilities included innumerable hours of courthouse research, days studying the natural gas industry and negotiating deals that never succeeded. He even traveled to Houston to market the land that their farms, orchards and businesses have rested on for generations.

“We didn’t sign in the end, but for quite a long time we were dancing with Chief,” Mr. Field said. “The only reason we danced with Chief Oil and Gas was because we did courthouse research that revealed they had a couple thousand acres right contiguous to our block.”

Mr. Field didn’t realize exactly what he was getting himself into that day. He never thought he would have to hunt down the estranged brother of a neighboring family to gain his signature on their lease.

“It actually took a couple months to find the brother in California,” Mr. Field said. “They actually tracked him down through his union.”

Just as much, Mr. Traver and Mr. Brody – whom Mr. Field called upon to help organize the group – didn’t think they would be studying geology or helping to cover a several thousand dollar attorney bill.

Two days after the group signed the lease on July 10, Mr. Field, Mr. Traver and Mr. Brody sat down with Times Shamrock Newspapers for an exclusive interview about the experience. It was a complete about-face for the tight-lipped trio who refused to jeopardize any part of the deal before it was done.

Sitting at the wooden picnic table behind Mr. Field’s house, not far from the barn where the group held some of its meetings, the three men smiled as they shared stories.

“Getting up to speed on (natural gas) and keeping the people together was always, I guess, our biggest concern,” said Mr. Field.

“But the people stayed together and that’s what made it happen,” Mr. Traver added.

“Some of our principles in the very beginning, when we first started out, was to stick together as a family, as a community,” Mr. Field continued.

A boomtown again?

It’s not difficult to imagine why the community would unite so well. The tiny farming community has struggled to strengthen its economy ever since Mosser Tanning Co. left town in 1961.

The tannery employed enough people to force the construction of a second hotel and a row of houses nearby. It brought unprecedented life to Noxen’s economy that was once based on just more than a dozen farms and a handful of small businesses.

“When the tannery left, everything left with it,” Noxen resident Pearl Race said. “This was a booming town at one time.”

So, when a gas company comes and injects millions of dollars into a community that has seen half a century pass by since its industrial backbone collapsed, residents are more than excited.

“I think it’s a wonderful thing,” Ms. Race said. “It’s got to help financially; much more taxes, much more money.

“We’re going to finish paying our mortgage off.”

Carrizo paid each lessor $500 per acre up front with an additional $4,500 and 20 percent royalty if the company finds a decent supply of gas.

On the day of the signing, Mr. Traver said, an elderly woman who was having trouble getting by stepped up to the table, leased her roughly 1-acre property and took her check. Mr. Traver’s wife, Dawn, offered to take her to the bank.

The woman, Mr. Traver said, declined the offer.

“I want to keep it for a couple days just to look at it,” she said.

The possibility of a check more than 10 times the amount they just received, it seems, has most folks embracing the words of former Alaska Gov. Sarah Palin: “Drill, baby, drill.”

“We want production,” Mr. Field said. “We’re not just out there to get the bonus money. The value in this arrangement is in the royalty.”

Is the gas there?

The problem is companies aren’t quite sure the gas is there. Carrizo bought 2-D seismic data, senior landman Phillip Corey said, to get an idea of what they’d find.

“Based on what we see, it looks OK,” Mr. Corey said. “You’re trying to extrapolate a picture with three data points, though, when what you really need is a hundred.”

The uncertainty is why Carrizo didn’t pay the full $5,000 per acre up front. The company will drill two exploratory wells to test the area’s potential before cutting any more checks.

The Noxen group is split into southern and northern areas. Carrizo will drill one well in each area. If gas production is strong in the north but not the south, Carrizo will only have to pay northern landowners and vice versa.

Wooden stakes with neon flags tied to the tops mark the location of the northern well in Mr. Field’s pumpkin patch. The Sordoni family’s huge Sterling Farms property will host to the southern well.

The Sordoni property is one of a few properties directly abutting Harveys Lake. A provision in the lease prevents Carrizo from drilling within 500 feet of any structure or water source.

Still, some folks are concerned with what might unfold.

Noxen resident Viola Robbins, 72, has family in Dimock Twp., the poster-child community for environmental disasters caused by natural gas drilling. Thousands of gallons of potentially carcinogenic drilling fluid spilled just outside the town.

HOP BOTTOM – Linda and Bob Lewis didn’t sign up to be part of Susquehanna County’s natural gas plan, but the industry is coming to them anyway.

The Lathrop Twp. property owners live along Route 2002, outside Hop Bottom, where Chief Gathering, a subsidiary of Chief Oil and Gas, is constructing a 12-inch pipeline headed to a nearby compressor station.

The pipeline construction is taking place on private property along a state Department of Transportation right of way.

It is the construction along the road that has Mrs. Lewis alarmed.

“They’re going right through the yard,” she said. “I’m so upset about it. PennDOT has given out permits to run the pipeline through the right of way and they say there is nothing we can do about it.”

PennDOT spokeswoman Karen Dussinger confirmed that the agency granted the gas company permission to install the pipe in its right of way. Ms. Dussinger said the right of way varies from place to place and could range between 25 feet and 50 feet from the centerline of the road.

“Property owners often believe they own the land right up to the road itself, but that isn’t so,” said Ms. Dussinger.

She explained the right of way is an easement the state gives PennDOT in order to maintain the roads.

Mrs. Lewis is concerned about the proximity of the pipeline to her home.

“I don’t know how they can go so close to homes with a 12-inch pipeline,” she said. “If that thing blows, we’re off the map.”

She said she has known about the pipeline coming through the area since January, but only recently learned it would be built along the side of the road she lives on. She said she has tried to contact Chief Oil and Gas for months but her calls were not returned.

Officials at Chief Oil and Gas could not be reached for comment.

Department of Environmental Planning, Bureau of Oil and Gas spokesman Dan Spadoni said the agency requires erosion and sediment control plans along proposed pipeline routes. He said a storm water discharge plan may also be required on pipeline projects.

DEP would also require a construction and encroachment permit if the pipeline was going to cross any streams or impact a wetlands area. DEP does not regulate the material and construction standards or set a minimum depth the pipeline has to be laid below the ground.

“It’s scary to have a 12-inch pipeline right out in front of your home,” Mrs. Lewis said. “That’s a lot of pressure.”

Chief to offer “substantial” cash, says solicitor, who wants to see land involved, right-of-way agreement.

DALLAS TWP. – An oil and natural gas company has asked township officials if it can lay pipeline underneath township property in return for money.

Two officials from Chief Oil and Gas attended the supervisors meeting Tuesday evening in search of an answer as to whether they can lay pipeline under a parcel of township-owned land.

Supervisor Glenn Howell said the land is along a gravel road off the Old Tunkhannock Highway. The gravel road leads to a Little League field and some other things, he said.

Township solicitor Thomas Brennan confirmed the company is offering “a substantial amount” of money to the township to lay the pipeline, though Brennan would not disclose the amount.

Brennan said there is no question about the legality of allowing the company to lay the pipe underneath township land. However, he said he first wants to take a look at the land to know what is involved.

The officials from the company also are wondering what they would have to do if they wanted to lay pipe under or along the township’s right-of-way. They said more than 20 miles of pipeline is planned coming from the north and terminating east of Dallas High School.

Brennan asked if the officials could provide a copy of the agreement they have with the Pennsylvania Department of Transportation regarding their right-of-way usage. Brennan told the officials that he would have more information for them at the next supervisors meeting on July 6.

Earlier on Tuesday, township Zoning Officer Len Kozick said he’s heard from property owners in the township that they are being offered right-of-way agreements as well. And at least one agreement has already been signed.

According to Luzerne County property records, Leonard DeLeur, who owns Back to Basics – a fireplace and stove shop in Dallas – leased a 50-foot right-of-way along the edge of his 24-acre property in the township.

DeLeur said Chief offered him $20 per foot of pipeline laid on his property.

Kristi Gittins, vice president, Chief Oil & Gas, said a definite path has not been chosen for a pipeline, and one won’t be chosen until wells are drilled. She said no imminent drilling is planned for Luzerne County; the company’s next two wells will be drilled in Sullivan and Wyoming counties.

Josh Longmore, director of the Luzerne Conservation District, confirmed that drilling is slated to begin on his father’s land in Monroe Township, Wyoming County, in mid-July. His father, Robert Longmore, has a lease allowing Chief to drill on his 97-acre farm near Noxen Township.

Chief, which has 75 wells drilled in 10 counties, has wells in Lycoming, Bradford and Susquehanna counties that are producing gas, but there’s currently no way to get it to market. Gittins said gas is going to market from only about half of Chief’s wells in the Northeast because it takes a while to build a pipeline infrastructure where none previously existed.

Gittins said it costs about $1 million a mile to lay pipeline. And lease holders don’t see any royalty money until the gas gets to market.

Gittins said that Chief is selectively seeking leases in Luzerne County, but only in the area of currently leased land, she said. The company has leased a few properties in Fairmount Township. The Dallas, Texas-based company has 650,000 acres leased in Pennsylvania and West Virginia, she said.

In other business, supervisors awarded a bid for a paving and drainage project on Main and Campground roads to Popple Construction, the lowest bidder, at $147,530 for Main Road and $56,642.33 for Campground Road.

Supervisors Vice Chairman Frank Wagner previously said the project will consist of paving Main Road from the Kingston Township line to Route 309, as well as all of Campground Road.

Also, George Stolarick, who said he has lived on Ridge Street for the past 45 years, asked the supervisors to consider paving his road. Stolarick said that although there are only three houses on his road, eight families use the road to access their homes.

But, Supervisors Chairman Phil Walter said “it’s not in the cards right now.”

Rebecca Bria, a Times Leader staff writer, may be reached at 970-7436. Steve Mocarsky, a Times Leader staff writer, may be reached at 970-7311.

NOXEN – Chief Oil and Gas may begin construction on a natural gas well just a few miles north of the border between Luzerne and Wyoming counties as soon as the second week of July.

Off Route 29 in Noxen, short stakes mark the future location of the drilling pad on Robert Longmore’s 97-acre farm. The state Department of Environmental Protection is currently reviewing the Texas-based gas company’s permit to place and operate a well it filed May 11.

The farm is near properties that are part of the Noxen Area Gas Group, a body of roughly 150 families with a combined 8,500 acres which is in the midst of negotiating a lease with Houston, Texas-based Carrizo Oil and Gas.

Just down the road from Longmore, Noxen group organizer Joel Field verified that the group is in the final stages of negotiation with Carrizo. Field and co-organizer Harry Traver declined further comment due to the sensitivity of the negotiations.

Longmore, 56, has owned the farm since 1998 and signed a lease with Chief roughly four and a half years ago. The landmen who approached Longmore about the deal, he said, made the three-page lease giving his family $25 per acre with the minimum 12.5 percent royalty sound like a good deal.

“We were kind of taken advantage of four and a half years ago,” Longmore said. “I know people getting $6,000 an acre.”

The lease had almost no provisions protecting Longmore’s farm. At the time, the landmen made it seem unlikely that drilling would ever commence during the terms of his lease, which ends May 15, 2011.

Since Longmore signed, though, he said his experience with the company has been much more positive.

Earlier this year, the Longmores were given the opportunity to amend the lease.

“They proposed some amendments to the lease,” Longmore said, “so we countered with some amendments with some environmental stuff.”

Chief offered to reopen the terms of the lease in order to add protections for the company in anticipation of a Pennsylvania Supreme Court decision that could have invalidated thousands of gas leases where gas companies were deducting production costs from the state minimum royalty.

The opinion on the case was an interpretation of the Pennsylvania’s Minimum Royalty Act which establishes the 12.5 percent royalty requirement for all oil or natural gas recovered from a well but doesn’t stipulate when to calculate the royalty.

The court ultimately decided in favor of the gas companies roughly a week after the Longmores and Chief finalized the revised lease.

The Longmores added amendments that protected ground and surface water, along with the 0.25-mile stretch of Bowmans Creek that runs through the property.

Longmore’s son, Josh Longmore, manages the Luzerne County Conservation District and helped his father amend the lease.

“Unfortunately, they signed a very basic lease that didn’t have some of the protections that the newer leases have,” Josh Longmore said. “Our biggest goal, our biggest hope is that the property maintains its natural beauty, its agricultural purpose.”

The younger Longmore doesn’t have any stake in his parents’ farm, but felt that it was necessary to help. He and his father combed through leases that they found online and pulled out the clauses that fit their needs.

“There was like three or four different categories of amendments,” Longmore said.

The company did draw the line on an amendment that would have prohibited the company from disposing cuttings – the rock equivalent to sawdust – on the pad. The company argued it would be cost-prohibitive to haul it off-site, Longmore said.

“I really got the impression that they weren’t hiding anything from us,” Longmore said. “They were willing to answer every question we had.”